BT and Virgin Media to report broadband slowdown

Investment or cuts? Whaddya reckon?

Common Topics

Analysis Newspaper and City knives are being sharpened for the UK's two biggest internet providers this week. Our major infrastructure owners, BT and Virgin Media, are set to release disappointing results at a watershed moment for broadband.

Virgin will be put in the stocks first, on Wednesday. It's expected to reveal more customer losses after net 70,000 headed for the exit across its quad-play business last results round. Analysts are predicting a Q3 exodus of more than 30,000.

However, the firm has been laying the groundwork so that it can claim a turnaround. New boss Neil Berkett has been trailing the obvious idea that Virgin should put broadband at the front and centre of its product range, having lost the battle over premium TV with Sky.

In Q2, broadband was Virgin's bright spot, bagging about 46,000 new punters. Market watchers Point Topic predict this time will see more new additions. Thanks to Berkett's recent repositioning of the firm as primarily a premium ISP... hey presto! It's a turnaround.

Virgin's new broadband cohort will be the smallest since early 2003, however - when broadband take-up was accelerating rapidly.

Unlike Virgin, BT's other businesses have been consistently successful for a while. What'll put the kibosh on its run of form is a radical shake-up across the business that is expected to cost thousands of workers' jobs. The restructure, aimed at making BT better able to exploit its technology in its global and enterprise markets, was announced in April, but will now begin to bite.

BT is also expected to report a similar slowdown to Virgin's in broadband. The days when ISPs could rely on converts from dial-up to keep their customer counter ticking up are over.

Point Topic chief analyst Tim Johnson said: "The reason for the sudden drop is largely the shrinking size of the remaining pool of dial-up users. Not only are there fewer of them but the ones that are left are also more resistant to change.

"On top of that, the industry has been failing to bring enough new homes on line."

It means that the rabid competition in broadband - which has seen smaller players lacking the investment muscle knocked out and bought up - is set to become even more fierce.

Hard times in ISP land mean the Government and Ofcom's upcoming discussions with industry over who'll pay for better internet infrastructure in the UK will take on a spicier flavour.

Almost 40 per cent of British households lack internet access. As more and more of the economy and society is run online, pressure on politicos to force investment will only grow.

Point Topic commented: "While growth is slowing throughout Western Europe it is likely that France will once again overtake the UK as the fifth largest broadband country in the world."